Here is the dilemma. Is it politically more perilous to appear too tough or too tender? Since David Cameron, no one knows. As the government ponders its imminent welfare reform green paper, which looks worse, wimp or thug?

Mercifully, the threat to cut £20 a week from sick claimants, as suggested by No 10 in a leaked letter, has been sent back to the asylum it came from. From his early days as leader Tony Blair has intermittently promised swingeing (if unspecified) "welfare reform", but feels thwarted by his party and his faint-hearted ministers. John Hutton, sent into the Department of Work and Pensions (DWP) to enforce the prime minister's will, now too seems to have gone semi-native, like David Blunkett and Alan Johnson before him; the facts showed them all that this "get tough" ideology made no sense, either in the real world or politically.

Scenting a "Blair weakness" story, the Tory press are sharpening their knives. The Mail reported that "Labour dramatically caved in over sickness benefit reform". Hutton's plans are "exceedingly unambitious" sneered the Telegraph, doing nothing about the "thousands who have chosen dependency as a way of life", whereas the US has "drastically reduced the number of supplicants on its welfare rolls by disqualifying those who failed to make proper efforts to achieve independence".

That hurts inside No 10 where class-of-94 New Labourites have political instincts forged in the days when the highlight of every Tory conference was a parade of threats against the state's dependents. Remember Peter Lilley's toxic "Little list", his Gilbert and Sullivan pastiche about welfare scroungers? After 65 Labour MPs rebelled over the last incapacity benefit reform in 1999, Blair made barnstorming speeches declaring the social security budget out of control, spending three times more than education and twice as much as the NHS. This was scaremongering; it was rising at the same rate as GDP, despite a growing proportion of pensioners. In fact, the unemployed were flooding back to work.

How times have changed. Now No 10 is in danger of sounding tougher than the Tories who have just demanded incapacity benefits should not be slashed, forcing Hutton to promise: "This is not a cuts programme." You have to pinch yourself listening to the dulcet tones of the new Philip Hammond, now shadow work and pensions secretary (previous form: a Davis supporter, health spokesman calling for a bare-bones NHS and big private health, and adamantly anti-minimum wage and the New Deal). How silkily the new script slides off his tongue: "At least a million people on IB want to work. It is far easier to dangle a carrot in front of the willing, before anyone need think of taking sticks to the few who may be unwilling." So where are the scroungers of yesteryear? "We find in our surgeries that most IB people have really complex problems. They need help with mental problems and sheltered work places, very few malingerers." Pinch yourself - and keep sniffing for the old wolf beneath all this lambswool.

This puts the government in a quandary. What note should it strike? The answer, of course, is a moderate one. The DWP is billing the plans as "radical" - and they will indeed be radical if they get a million back to work. Look at the facts: 2.7 million claim IB, but the number is falling fast, with 100,000 fewer new claimants in the past year. Why does it need reform? Because it is badly run, not unlike the old asylum system that lost people. For example, GPs sign people on to IB, but 30% of GPs never fill in the form so those people sit on IB forever unquestioned. Perverse benefit incentives mean if someone takes a job and it fails, they lose their old right to £20-a-week IB, so why risk it? The longer they stay on IB, the higher it rises, so trying out a job gets riskier. The system asks people to stress their illness, leading to a cycle of helplessness and depression. Once on IB for a year, most will never work again.

There is a natural unease about jolting these people. They are the weakest and poorest in the poorest areas. If GPs sign them on to IB, more money is exactly the prescription they need, sick through poverty. Yet there are often vacancies and every study proves how work is the best welfare. People feel better in a job, especially these, the forgotten.

Pilot schemes - Pathways - have been hugely successful and will cover a third of the country by the end of this year, doubling the number returning to work. They offer new claimants medical and psychiatric support, training and specialist advisers. There is a £40-a-week return-to-work bonus, with a promise that if the job fails, they can return to their old IB status. It has been so popular that old IB claimants who don't strictly qualify have asked to join.

However, the green paper will be tougher than that. Old claimants who might work will have to join the scheme, although it won't touch their current benefits. This is right but contentious: wait for the blunders as a quadriplegic gets a threatening letter.

Above all, this is expensive. Battalions of well-trained advisers will need new flexible services to offer whatever it takes to get someone back to work. The cost nationally is estimated at nearly £3bn. Will the chancellor pay up, with money so tight? He should, as the pilots show the cash is repaid in saved benefits within three years. But traditionally the Treasury is wary of those "it's really an investment" arguments.

This feels weirdly like the end of politics. Labour need no longer present this green paper (nor today's respect agenda) with a fist-shaking flourish. No need to rile its backbenches if constructive policies are welcomed (apparently) by the Tories. the Mail and Telegraph may froth at the mouth, but Cameron is singing from Labour's songsheet.

Far greater reform questions remain untouched by any party. How long can the empty national insurance sham last? Incomprehensible to most people, millions are now wasted on those who don't need it. The DWP itself is an anomaly that should be folded up into the Treasury, alongside tax credits.

But whoever administers benefits, the same problems will last forever. How do you help the fragile into work that is good for their wealth and wellbeing without strong-arming the weak into low-paid jobs beyond their strength? Even the Tories now say the carrot works best. No more scroungers? If it's real, what a victory for civilisation!